Opinion
Mint Quick Edit | An earnings let-down adds to the bearish trend
Summary
- Third quarter corporate results have deflated investor hopes of a stock market revival led by enlarged profits. The path ahead looks rocky for Indian equities. Does a bear market loom?
With Indian shares showing a bearish trend, hopes have been riding on a corporate-earnings pick-up to provide relief. Unfortunately, new data on that front doesn’t seem encouraging.
The profit-after-tax of Nifty 50 companies grew a modest 5% from a year earlier in the three months ended 31 December, according to research by Motilal Oswal Financial Services.
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This marks the third quarter in a row of single-digit profit growth, a weak run unseen since the pandemic. Segment-wise, large-cap companies met earning expectations, mid-caps outperformed and small-caps reported significant misses.
This doesn’t bode well for India’s broader markets.
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As earnings fail to catch up with the steep share-price rises seen during the bull run that peaked in September 2024, we could see further declines. With valuations still elevated, especially for small-cap shares, we could see more price corrections that may dampen investor sentiment. And with the rupee weakening so much against the dollar, foreign investors, whose gains shrink as a result, might continue to stay off Indian stocks, by and large.
Notwithstanding India’s 6%-plus rate of economic growth, the path ahead looks rocky for equities.
